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These articles by Barbara Fox and Kathleen McGinn Spring were
prepared for the April 4, 2001 edition of U.S. 1 Newspaper. All rights
From the Advance Man, A Bullish Forecast
All up and down Route 1, "no vacancy" signs
are appearing. Princeton Service Center, the weathered old man of
the office parks, is full up, and very few spaces remain at premiere
sites like the Forrestal Center and the Carnegie Center.
So though stock market worries might give some people a case of the
jitters, and RCN’s abrupt suspension of its massive building program
might cloud the horizon, developers are going full speed ahead with
their speculative building plans.
Take the Advance Group, for instance. This Bedminster-based developer
first entered the Princeton market with what is familiarly known as
the "Bovis Building" on the corner of Alexander Road and
Drive, named for its prime tenant, Bovis Lend Lease. Like the other
new construction along Alexander Road, this one filled quickly. Just
3,000 feet have yet to be leased there.
For two years Dean Lundahl has been the Advance Group’s advance man
here. He was the former partner in charge at LCOR and before that
at Linpro, the privately owned firm that developed and managed
Enterprise Business Park and Princeton Meadows plus a significant
portion of Plainsboro’s new housing. Lundahl has put Peter Cocoziello,
founder of the Advance Group, into four more projects: a new building
at the Carnegie Center, a building near the Trenton-Mercer airport
in Ewing, a massive redevelopment by the river in Trenton, and the
astonishing proposal by the Sarnoff Corporation to develop a 3.5
square foot campus, complete with full service hotel and day care
What might tie all these projects together is a potential solution
to the traffic problem. Lundahl has been talking to NJ Transit about
innovative mass transit solutions to link the Forrestal Center,
and the Carnegie Center, all the way down to Trenton. "We are
exploring both light rail and a new concept called bus rapid
he says. Under the latter solution, buses could travel quickly on
a dedicated road along the railraod tracks, and then exit to pick
up passengers on local streets.
Lundahl is bullish on Princeton, in good measure because he was such
a successful survivor of what he glumly refers to as the "real
estate depression," which ran from the late 1980s to the early
’90s and plunged many into insurmountable debt. "`Stay alive ’till
’95’ was the banner call in the real estate business," he
"But we knew it would get better. We had no idea that it would
get as good as it got."
It gets pretty good on the Princeton development scene, Lundahl
He points to the balance of Princeton’s market, "an almost equal
distribution between pharmaceutical, financial, insurance, and
a market that historically — at least for class A space —
has been very resilient in bad times." In 1992 when vacancy rates
ran to 20 percent, prime real estate like the Carnegie Center was
at six percent. "The higher end product has been resilient even
in bad times, both from the rental and the vacancy standpoint."
Another plus for Princeton is its built-in safety net for smaller
companies, a net that is held in place by the larger ones.
"Most of the land in Princeton is controlled by a very small group
of very sophisticated companies, Boston Properties and Princeton
and also Brandywine Realty Trust," says Lundahl. "Because
they are sophisticated owners, they have a tremendous amount of
as to how they go about the development of their properties. You are
not going to see unfettered speculative development, the overbuilding
that you might see throughout the state. And, quite frankly the
in Mercer County is very progressive. On the township level, there
is strong support for smart growth development."
If Dean Lundahl worked as a diplomat, he would be known
as an "Old China Hand," someone who has been around the block
and survived more than a few crises. Ten years after he got into the
business, he ran into the dilemma of his career, the recression that
he terms the depression.
"I don’t think people outside the real estate business understood
how bad it was in the real estate business," says Lundahl. "I
cashed in my insurance policies to educate my two daughters and sold
the stock I had. I was pretty nervous about the future — there
seemed to be no light at the end of the end of the tunnel. I was very
fortunate that the two projects I had been involved with were very
successful. You had to be very creative."
Of Swedish extraction, the son of a frequently-transferred engineer,
he was a 1969 pre-veterinary major at Colorado State, "won"
the draft lottery, and served a year in Vietnam as a lieutenant in
the Signal Corps. By age 22 he was a company commander. Once home
and married to his high school sweetheart, he needed to support a
family. He set aside his dream to be a vet, and used the GI Bill for
an MBA at Drexel. He took a job for one of the Big Eight accounting
firms as a way of picking his future career.
Liking the people he found in real estate, whom he describes as
sometimes flamboyant," and attracted by the creativity of the
industry ("a very exciting go go business — there was no
he joined Linpro at age 27, determined to be a developer.
Linpro’s Princeton operation was one of the largest planned community
developments on the East Coast and one of the most successful. By
age 32 he had made partner, and at one point he was partner-in-charge
of a three-state region.
His first project was four one-story office buildings at Princeton
Meadows at 666 Plainsboro Road, built in the early 1980s. He found
an unfulfilled niche in the market for these 700 square-foot offices
for medical professionals, branch sales offices, and start-ups. The
first phase had buildings facing the road and the shopping center,
but many businesses wanted no public face, so he positioned the rest
to look into a landscaped courtyard.
After building three more clusters, he started on Enterprise Business
Center, first on Morgan Lane, then on Enterprise Drive. That 70-acre
1,250,000-square foot project was halted less than half-way through
by the depression.
"We had used a significant amount of our cash resources to stay
current on our debt," says Lundahl, "and it is a tribute to
Linpro that we were able to work our way through that debt." Many
other well-known names in the development community were not so lucky
and either defaulted or went into bankruptcy. "It wasn’t
their fault; it was a depression."
His company survived by doing for-fee development, working with
RWJ Hospital, and New Brunswick’s development company (Devco) to build
the $60 million high rise Easton Avenue mixed use complex, with 200
residential units, a 100-car garage, and retail space. It also got
cash flow from its Plainsboro residential units. Linpro had developed
about 1,000 acres including a golf course, a sewer treatment plant,
4,000 rental units, and approximately 2,000 for sale units —
more than 1 million square feet.
His roster included the familiar names in Plainsboro
— Fox Run, Deer Creek, Hunters Glen, Quail Ridge, Raven’s Crest
— and they were sold at the right time, says Lundahl. "When
we sold Ravens Crest to Equity Residential we achieved one of the
highest prices per unit in the state of New Jersey."
With "depression lessons" in mind, Lundahl is hedging his
bets at the new company. He is doing "development for hire"
with the Sarnoff project and is looking to diversify into multi-family
residential projects, which would be "counter cyclical" to
commercial trends. But he isn’t really worried about the future.
"As a business we have become much more disciplined," says
Lundahl. Then, the developers did not have to put money into their
own projects, but were "liable" for any deficits. "That
money source caused over building and caused a recession in the rest
of the economy."
In the bear real estate market, the "joint and several
clause reared its ugly head: If you borrowed $10 million to do a
each one of the project’s partners owed that $10 million. If the 90
percent owner couldn’t pay it, the person who owned 5 percent might
have to step to the line for the full $10 million. Many found
in bankruptcy with huge tax liabilities.
Lenders no longer use that clause; they require developers to come
up with more than just sweat equity, perhaps 25 to 40 percent of the
cost of a project. Developers are not using personal funds, and
feel there is less risk.
Lundahl rejected the idea of working for a Real Estate Investment
Trust, a REIT that is publicly traded. "As a partner with one
of the largest privately owned companies in the United States, I had
my own department, my own staff, and had to manage and direct a lot
of people. At Princeton Meadows I was responsible for managing the
development that had a market value of over half a billion
"After 20 years as a private developer, I just felt that with
the constraints of reporting to Wall Street, that working for a
company was what I wanted."
With the Advance Group, he is under contract to buy the rights to
build 902 Carnegie, a 140,000 foot five story office building, and
is going in for approvals in May. Lundahl’s Ewing project involves
100,000 square feet of office space on 10 acres adjacent to the
on Scotch Road, on a ground lease from the county. The township has
seen the concept plan.
In Trenton, Advance owns three of four buildings in the Riverview
complex and is buying the fourth, currently occupied by the Department
of Education, and would add a parking deck available to stadium-goers
at night. Lundahl’s master plan for the Trenton waterfront involves
another 400,000 square feet of office and retail, another structured
parking deck, plus 200 condo units, with a parking deck.
"Peter Cocoziello is what I call a true visionary," says
"a smart man, a self made man. He is a man who flies, for the
most part, at 30,000 feet, and has a lot of very creative ideas. Part
of the challenge to the rest of his staff, including me, is to convert
his vision into reality."
Like every industry, commercial real estate has a lingo
all its own. In some cases, words are unique to the world of office
campuses, high rise mixed use buildings, and shopping malls. In other
cases common words have been used in a new way to describe the world
of building, buying, selling, and leasing structures used for
Black’s Guide, a national directory for commercial real estate, has
compiled a glossary of these words. Definitions have been endorsed
by numerous industry organizations. Some of the most commonly used
sold or leased in the marketplace during a predetermined period of
time, usually a month or year.
a debt becomes due in its entirely upon the transfer of ownership
of a secured property.
property, real or personal, or of any rights or estates in the
Common assignments include leases, mortgages and deeds of trust.
that is not designed for rental to tenants but that is available for
common use by all tenants or groups of tenants, their guests, and
adjacent stores. Parking, malls, sidewalks, landscaped areas, public
toilets, truck, and service facilities, and the like are included
in the common area.
relet space in accordance with a tenant’s specifications.
of rent abatement, build-out allowance, or other payments to induce
the tenant to sign a lease.
(rest rooms, hallways) that, when added to the net usable square
equals the net rentable square footage. May be computed for a building
or a floor of a building. A "Loss Factor" or "Load
is calculated by dividing the rentable square footage by the usable
in many states in place of a mortgage. Property is transferred to
a trustee by the borrower (trustor) in favor of the lender
and reconveyed to the borrower upon payment in full.
for both the design and construction of a facility, often involving
the fast-track method of construction.
evidence of good faith. The earnest money is used to bind the parties
to a contract of sale.
no common areas, high ceilings, load-bearing floors, and loading dock
facilities. Usually configured to allow a small amount of office space
in combination with light assembly or warehouse/distribution uses.
pay all expenses of the leased property, such as taxes, insurance,
maintenance, and utilities.
inferior or subordinate to a prior lien. Foreclosure of a junior
will not extinguish any lien which is superior to it.
upon a tenant’s personal property (e.g. furniture) and to sell this
property at a public sale to collect delinquent rent.
and real estate activity, including issued permits, indices of
costs, deeds recorded.
to rent, certain costs associated with a leased property, including
property taxes, insurance premiums, repairs, utilities, and
There are also "net-net" (double net) and
(triple net) leases, depending upon the degree to which the tenant
is responsible for operating costs.
(the core factor) of the common areas on the floor, including
bathrooms, and telephone closets. (And sometimes main lobbies.)
square footage is the number of square feet on which a tenant’s rent
the tenant agrees to pay a share of the landlord’s operation expenses
or real estate taxes for the building proportionate to the space it
contributes as part of the tenant improvements. Examples are doors,
partitions, lights, floor covering, and telephone outlets. The
may specify the quantity and quality of materials to be used and often
carries a dollar value.
with a lender to restructure the borrower’s debt rather than go
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